Have taken a look at this. The problem appears to be game-file related, your client isn't able to parse FACTION.TXT correctly, which means a few things aren't operating under the hood.

Would you be able to confirm which set of game files you are using (i.e. which distribution they came from)? Under Linux, the DaggerfallGameFiles.zip download I provide on the Live Builds page should not experience this issue.

I searched in the dos daggerfall directory, the daggerfall unity directory, and the directory where settings and saves are located, can't find FACTION.TXT anywhere, you sure it's not called something else? or am I just missing that file?

EDIT: I did download the zip from the builds page and yes it does work just fine now

It's in your Arena2 folder - part of the game files you must provide to Daggerfall Unity.

Once I know where things went wrong with the faction file, I can either improve the parser or add a new validation step.

My feeling is your original game files were not patched to .213. The GOG installer definitely patches correctly, but depending on how you deployed these files to Linux, something could have gone wrong in the process.